Bookkeeping Engagement Letter Template and Examples

Accountant / Bookkeeping Engagement Letter - Template and Examples

Engagement letters form an important part of any business relationship because they describe the expectations of the involved parties. Many professionals – including bookkeepers – prepare an engagement letter before embarking on a project with a new client. In this article, we look at the importance of a Bookkeeping Engagement Letter and tell you all you need to know to draft it.

What Is a Bookkeeping Engagement Letter?

A bookkeeping engagement letter is a document that outlines the scope of work a bookkeeper will provide a client, including a complete timeline and cost analysis. It is usually provided to a client (individual or business entity) that needs tax filing or auditing services. Usually, many of these clients will require that a bookkeeper or accountant sign this letter before work begins. Bookkeepers are also bound to this duty by their professional liability insurance.

Bookkeeping Engagement Letter (Word Template)



    Essential Elements of a Bookkeeping Engagement Letter

    Bookkeeping engagement letters define the scope of work a bookkeeper will do for a client. To do this, the document must contain the following details:

    • Parties: The letter identifies the client, which could be an individual, group, or company, and the bookkeeper offering the services.
    • Project Scope: It describes the services the bookkeeper will offer during their period of engagement. This could include accounts payable, budgeting, tax filing, or advisory services.
    • Project Period: The letter stipulates how long the project will last. If it is ongoing, it can define the parameters as monthly, annually, quarterly, etc.
    • Fees: The bookkeeper uses the letter to define their hourly rate, flat rate, retainer fee, or charge per project depending on the fee structure they use.
    • Client Roles: This element explains what the bookkeeper will expect from the client during the project, which in most cases, involves providing information that is relevant to the project.
    • Confirmation of Terms: The last section of the letter allows the bookkeeper and client to confirm the terms of the engagement by affixing their signatures.

    How to Write

    Most accountants and bookkeepers have a template they use to prepare engagement letters for their clientele. The templates will usually include all the elements discussed above presented in a professional, non-legalese language. If you don’t have a template or have one and don’t know how to use it, here is a step-by-step guide to writing a Bookkeeping Engagement Letter:

    Step 1: Identify the Relevant Parties

    Start by indicating the date the engagement letter was prepared (at the top of the page), then identify the client. Specify whether they are an individual, group, or company and write down their name, contact information, mailing address, website, etc.

    Step 2: Define the Scope of the Project

    Next, explain exactly what you will be doing for the client during the duration of the project. Your services may include any roles you are qualified to perform, including budgeting, advisory services, accounts payable, and accounts receivable.

    Note: Including the scope of the project in the engagement letter gives you ground later on to prove that you provided the services you promised the client – nothing less, nothing more. It also protects you from project creep should the client ask for services outside your scope.

    Step 3: Define the Project Timeline

    Now, outline how long the project will take, paying attention to ongoing projects, which can be described as monthly, quarterly, etc.

    Step 4: Highlight Your Fees

    Indicate your fees for the project, identifying your preferred fee structure. This is where you explain whether you charge per hour, per project, or a flat or retainer fee. Additionally, mention when you expect to receive payment, how your rates will change if the client requests extra services, and what happens if your payment is late.

    Step 5: Identify the Client’s Roles

    Explain what actions you would like the client to perform to facilitate the project. This could include providing you with relevant business records – make sure to outline the documents you need.

    Step 6: Confirm the Terms of the Agreement

    Include a clause for the client to sign the letter if they agree with the terms of the engagement. This signature will protect you from project creep, late payments, etc.

    Sample Audit Engagement Letter

    2 August 2031

    IJK Company

    300 Jill Road

    Birmingham, AL 21200

    Re: Audit Engagement Letter

    Dear Mr. Langham,

    This engagement letter outlines the terms and limitations of the audit services ABC Accounting has agreed to perform for the Client, IJK Company, for the year ending 2031.

    I, Felicia Watkins, will be your main contact for this project, and you can contact me if you have any questions. I will audit your consolidated balance sheet and the related income statements, cash flows, and retained earnings then express an opinion on them.

    From the company, I will expect that all financial records and relevant information be made available to me on time. My total fee (initial estimate) is $560, with an hourly rate of $28. This amount is subject to changes depending on any developments in the project.

    If this letter correctly captures your expectations for this project, please sign this copy and return it to ABC accounting.

    Sincerely,

    Felicia Watkins

    ABC Accounting

    Sample Tax (Filing) Engagement Letter

    2 August 2031

    Logan Industries

    901 Munchkin Street

    Boise, ID 901720

    Re: Tax Preparation Engagement Letter

    Dear Danelle Logan,

    This engagement letter outlines the terms for the tax preparation services that I, Felix Darken or ORC Accounting Services, will offer Logan Industries.

    I will prepare your state and federal income tax returns and perform accounting services only as needed to complete this task. My services will not include finding irregularities in your financial records. However, I will inform you of any error, illegal acts, or fraud that I discover.

    To complete my duties, I will expect the company to provide me the relevant data I need to file your taxes. I will keep this information confidential.

    I charge an hourly rate of $32 per hour, and the number of hours I will take to complete the project will depend on the complexity of the return.

    If this letter correctly summarizes your expectations for this project, please sign this copy of the letter and return it to ORC Accounting Services.

    Feel free to contact me if you have any questions.

    Sincerely,

    Felix Darken

    ORC Accounting Services

    Sample Standard Engagement Letter

    2 August 2031

    Union Realtors

    100 St. Claire Street

    Albany, NY 13000

    Re: Bookkeeping Engagement Letter

    Dear Henry Dunphy,

    I am preparing this letter to outline the terms of the bookkeeping services to be provided by Roberts Accounting, LLC to Union Realtors for the year ending 2031.

    Roberts Accounting, LLC will provide the services as discussed during the meeting held on 29 July 2031 and attached in this letter as ‘Project Scope.’

    Our fee is $30 per hour, but the duration will depend on the complexity of the project. We will expect your company to provide us with accurate, clearly labeled documentation for the success of this project.

    Your primary contact for this project will be Milly Roberts, and you can contact her directly if you have any questions or concerns.

    Please sign below if you agree with the mentioned terms.

    Sincerely,

    Teresa Roberts

    Roberts Accounting, LLC


    How to Hire an Accountant (Step-by-Step)

    If you wish to hire an accountant to handle your financial accounts, you will need to prepare an agreement that outlines their scope of work and fees. This has been explained in previous segments. Below, we look at how to get an accountant on board in the first place:

    Step 1: Determine the Type of Accountant

    Most clients that outsource their accounting projects are usually looking for a tax filing accountant to handle end-of-year financial records. Nonetheless, there are ten types of accountants you could hire:

    • Financial Advisor
    • Management Accountant
    • Auditor
    • Tax Accountant
    • Project Accountant
    • Staff Accountant
    • Cost Accountant
    • Investment Accountant
    • Forensic Accountant
    • Government Accountant

    Step 2: Find References

    Once you determine the type of accountant you need, you should look for referrals from friends, colleagues, or family members that have worked with an accountant before. This way, you can find someone responsible and trustworthy.

    Step 3: Do an Online Search

    If your friends and family can’t recommend anyone, visit websites like Bark.com, Thumbtack.com, and Yelp.com and search for highly reviewed accountants in your area.

    Step 4: Meet the Accountant

    If you find an accountant that fits what you are looking for, plan a meeting to negotiate the project and their fees. According to the Bureau of Labor Statistics, the average hourly rate for an accountant is $33.89. Keep in mind that the exact value will vary from an accountant to the other.

    Step 5: Sign the Engagement Letter

    Lastly, have the accountant prepare an engagement letter, and if you agree with the terms, sign it. They are now free to begin the project.

    Frequently Asked Questions

    Do bookkeepers need engagement letters?

    Yes. Most clients require that accountants and bookkeepers prepare an engagement letter before they begin a project. This is also often a requirement by the bookkeeper’s professional liability insurance.

    Is an engagement letter a contract?

    An engagement letter outlines the terms and conditions of a project but is less formal than a contract. This does not mean that it is not legally binding once signed and, in fact, it can be used in a court of law.

    Who is responsible for signing the engagement letter?

    The engagement letter is prepared by the bookkeeper and must be signed by the client if they agree with the terms outlined in it.

    What is the difference between an engagement letter and a contract?

    An engagement letter is less formal than a legal contract, although it is still legally binding. Both documents can be used in a court of law, but the former does not use legal jargon.

    Key Points

    A Bookkeeping Engagement Letter is a formal way of outlining the terms, limitations, and expectations of a bookkeeping or accounting project. It explains what the client expects from the bookkeeper, what the bookkeeper will do, and what conditions must be met for the project to be completed. Additionally, it outlines the fees and costs of the tasks.

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